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How CIOs can tap into their investor network when looking for vendors

How CIOs can tap into their investor network when looking for vendors

Partner & Head of TMT Growth Equity

Dave Welsh (Menlo Park) is a Partner and is Head of TMT Growth Equity within KKR's Private Equity platform, where he serves ...Read More

By Dave Welsh Aug 21, 2018

CIOs should turn to investors for insight into vendors as they can provide CIOs with an understanding of technologies offered by their portfolio companies, insights into the tech solutions their portfolio companies are using, an early read on upcoming technologies, and even help with pricing benefits.

Do you turn to the investors in your network when looking for possible new tech solutions to implement?

You should.

Investors can provide CIOs with an understanding of technologies (both good and bad) offered by their portfolio companies, insights into the tech solutions their portfolio companies are using, an early read on upcoming technologies, and even help with pricing benefits.

No matter the size of your company, CIOs don’t have the time and resources to spend evaluating every hot new technology and every last vendor. CIOs at large companies, who might long ago have said good bye to their venture capital investors, still have reasons to find the next big thing. You might be dealing more with process, scaling internationally, evolving beyond legacy or homegrown solutions, but you’re not going to want your competition (especially smaller, more agile startups) to find an edge through their use of technology. And then CIOs at smaller companies need those foundational technologies that can help them scale in the years to come.

The Startup Scene Now

CIOs can think of investors as helping to narrow the funnel. During the past 10 years, there’s been an incredible proliferation of startups making it hard to discern the players from the pretenders in many sectors. A decade ago there might have only have been five to 10 legitimate vendors in any given space, while today there could easily be upwards of 50, some of which are quite specialized. It’s impossible for a CIO to know about everything. A network of investors can help identify new technologies and get a head-start on validating them.

For example, our team evaluates thousands of companies a year and, on top of that, tracks a broader set of several thousand companies. We have investments across the tech landscape, including security, IT automation, spend management, business intelligence, networking, and more. We also try to stay plugged in to up and coming technologies in different geographies targeted at a wide range of organizations.

An Investor’s Perspective

Investors occupy an interesting role. While not building and buying software ourselves, we are constantly talking to executives, customers and analysts about companies and their technologies. Our perspective is both as an outsider and an insider. Of course, I can understand CIOs being skeptical about getting a biased opinion. And yes, CIOs still need to do their due diligence and evaluate a range of alternatives. However, it’s important to keep in mind that investors have their own reputations to protect. To me, it’s exceptionally important that the feedback I provide to CIOs is accurate and objective. I’ll certainly tell CIOs about companies in our portfolio, but will also readily tell CIOs about other interesting companies for them in which my firm does not have an investment.

The conversations CIOs have with investors should focus on technologies that might be offered by the investor’s portfolio companies and about the technologies these portfolio companies are using themselves, since they will often be leading edge adopters of new, impactful solutions. Often through necessity and frugality, early stage companies have a vested interest in finding technologies that will help them scale faster and be more efficient. For example, more than a decade ago, the earliest adopters of cloud computing technologies were venture-backed startups. Cloud technologies expanded out from there to be used more broadly and today is ubiquitous across company size, location, and industry.

Connecting CIOs with other Viewpoints

CIOs can also capitalize on the hub role that investors serve connecting together many different kinds of companies, which can be especially useful for a CIO seeking out a peer to discuss an issue. We do a survey every year of the CIOs in our portfolio, which generates a better understanding of their current tech stack. The insights from that survey help inform us and the CIOs we work with about the ebb and flow of technologies at companies around the world. Additionally, investors sometimes convene discussions for CIOs and others in their network around specific topics, such as best practices for search engine optimization. Here again an investor’s role as a connector can be valuable in terms of bringing together several points of view and shared experiences that might be beyond the reach of a single CIO.

A sometimes unexpected place investors might provide a benefit to a CIO is on the pricing front. It’s not uncommon for investment firms to provide a program for discounted pricing or most-favored-nation pricing within their portfolio. And even if they don’t have a formal program, CIOs should not be shy about asking if there’s a possibility of a discounted rate.

I speak with CIOs regularly and find that value flows both ways. I get good insight into the changing priorities of CIOs and I try to provide insights that can help a time-strapped and cost-conscious CIO accelerate their knowledge of the fast-moving private company technology landscape.

If you don’t already speak with your investors when looking for possible tech solutions, I recommend trying it.